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Injecting drug users will be offered a breakthrough treatment for hepatitis C as part of a Melbourne study to assess whether treating them can reduce transmission of the virus in the community.

The combination treatment of ledipasvir and sofosbuvir is part of a promising new generation of direct-acting antiviral drugs, which target the protein that makes hepatitis C and stops it from replicating.

The drugs have been shown to cure hepatitis C in 90 per cent of patients, more efficiently and with fewer side-effects than existing treatments.

They have not been widely available outside clinical trials to date in Australia due to their high cost.

The Pharmaceutical Benefits Advisory Committee has refused an application to subsidise sofosbuvir, which costs about $70,000 for a 12-week course of treatment, due to its expense.

The combination treatment will be offered to injecting drug users over the next two years as part of a Burnet Institute-led study, sponsored by the drug's manufacturer, Gilead, to test whether it will result in fewer of their peers becoming infected.

More than 220,000 Australians are infected with hepatitis C, a blood-borne virus that can lead to liver failure.

The most common way people contract the virus in Australia is by sharing drug-injecting equipment. In other countries it can be spread through unsterile medical procedures and blood transfusions.

Burnet Institute head of the centre for population health, Margaret Hellard, said new treatments presented an opportunity to eliminate the virus from Australia and other countries over the next two decades.